Leadership Tactics Which Impact the Bottom Line

Leaders matter, especially in business.  To get ahead, to stay ahead, you must lead.  These four tactics can be used by any business leader, and have been scientifically shown to increase a business’ bottom line.

1. Charisma – the leader sees what is really important and instills a sense of mission, pride and respect in employees.  Money is not enough, employees need to see why their work is important.

2. Individualised Consideration – the leader gives projects to his team in order to promote learning and growth. The leader also provides coaching and teaching.  You can’t keep giving your most important projects to your best people; it is vital that all your team all grow and learn.

3. Intellectual Stimulation – the leader pushes colleagues to think in new ways and to use reason and creative problem solving.  You must push your team to go past what has worked before, because it may not work tomorrow.

4. Contingent Reward – the leader provides rewards when colleagues follow expected actions and contracts.  While money is not enough, it is important.  Staff need to know that you can get them the rewards that they want.

Together the first three tactics constitute a theory of leadership known as “Transformational leadership”, and the fourth tactic is half of what is called “Transactional leadership”.

The other half of transactional leadership is “Management by exception”, where the leader has staff follow the established rules and patterns as long as they are meeting performance goals.  Management by exception does not help a business’ bottom line, it is the opposite of transformational leadership and allows your competition to catch up and surpass you.

In the study linked to above, the researchers discovered a few more things about these tactics.

• They are more useful in public rather than private businesses. This may be because publicly held businesses are more bureaucratic and so need more people who can push new ideas.
• They are just as effective when used by leaders low on the org chart as when used by those at the top.  This is very important.  It means that no matter where you are in the company you can be a great leader and have a real impact on the business.
• They are more effective at making staff feel like things are going well, rather than affecting objective performance (like revenue). This is most pronounced with contingent rewards – the transformational tactics affect both employee sentiment and company performance quite a lot.

What all does this tell us?

1. Just doing what has worked, and is working, isn’t enough.  Other managers in other companies are trying new things, and eventually your old ways won’t be good enough any more.
2. You need to give a sense of mission to your employees.
3. You need to inspire them to come up with new ideas, and to give them opportunities to learn, try new things, and grow.
4. Inspiration is not enough.  Your team also need to see real rewards.

Leadership Tactics Which Impact the Bottom Line